Funding Co-Productions: A Complicated
But Tasty Recipe

by Michael Hirsh

Editor's Note: When we decided to investigate
how the complicated world of international co-productions really works,
we turned to someone who successfully assembles these deals everyday. As
co-CEO of NELVANA Limited in Toronto, Michael Hirsh has overseen co-productions
with over half a dozen countries. In this article, Michael explains firsthand
the recipe for success that has NELVANA's co-productions filling the airways
on both sides of the Atlantic and beyond.

Michael Hirsh.

For those of you who have attended the television
markets at NATPE, MIP TV and MIPCOM, you have probably noticed that a great
deal of animated product coming from outside the United States is the result
of international co-productions. These animated series and features are
the products of many negotiations, collaborations and international cultural
mediations. This article is an attempt to summarize the delicate and very
creative process of bringing an international animated co-production to
the screen.

Finding the ElementsThe first step is to locate a property that will travel well across
borders. NELVANA has often used classic properties, partly because they
have a universal appeal and work well for a variety of worldwide audiences.
A real advantage that animated co-productions have over their live-action
counterparts is that they often have no specific cultural references. Franklin,
for instance, is a talking turtle who has no basis in regional reality.
His forest home could be found anywhere in the world. Animation is also
much easier to dub into multiple languages than live-action programming.

Once you have found a unique property that is likely to have a wide international
appeal, the next step is to locate a co-production partner or partners.
A co-production partner must be based in a country with which your own
country has a co-production treaty. Unlike the United States, Canada and
several other countries have set up international co-production treaties
which establish the parameters of a co-production deal between the two
countries. Each treaty is different and serves as a guide throughout negotiations.
Canada, for instance, has signed more than twenty such treaties with various
countries around the world including France, Germany, the UK, Spain, China
and Russia.

Simply finding an available animation company in the appropriate country
is not nearly enough. A suitable partner must also think the same way about
animation as you do. A key preliminary question is, "What does each
partner want out of the production?" Sometimes, one partner is very
committed to high quality while the other wants to do a quick and dirty
low-budget project. It is crucial to know these differences up front.

Structuring the DealThere are many ways to financially structure a co-production agreement.
It could be anything from a five year licensing arrangement with a broadcaster
who funds part of the budget, to agreements that carve out distribution
rights by territory. Every deal is different, but here are a few of the
elements that we look for in structuring a deal. We usually seek out a
partner who is capable of sharing the risk with us in exchange for the
upside (back-end profit). We therefore want a partner who is solvent and
has the kind of capital to contribute to an animated series that will cost
approximately U.S. $350,000 per episode on average.

We also look for a partner who's government provides financial incentives
that complement those provided by Canada. These incentives will often come
in the form of tax breaks. We also look for a deal that fulfills European
as well as Canadian content quotas. If a German broadcaster is looking
for German content and our co-production qualifies as German, we have just
made the programmer's job a lot easier while increasing market penetration
for ourselves. The same, obviously holds true for our partner, who may
be looking for increased penetration into North America.

Ideally, we will come to an agreement whereby each partner can take advantage
of production subsidies in the other partner's country. This allows the
production as a whole to broaden its funding base.

Keeping the Creative On TrackIn negotiations with a potential co-producer,
we also look to minimize the risks. There is a risk that, without the proper
creative cohesion, a series or feature will become what Canadians call
a "Europudding" - a series or feature that is run by committee.
This kind of product inevitably loses its creative thrust and audience
appeal. A strong creative partnership will preclude this kind of situation.

Ned's Newt is a great example of a Canada/Germany co-production
agreement that worked well for two partners. This animated series showcases
the talents of each partner in a way that enhances the series as a whole.
NELVANA had the project in development when we approached TMO Film GmbH
about a co-production agreement. We retained distribution and worldwide
merchandising rights to the property. TMO acquired the right to distribute
the series in its native Germany. In this agreement, we share in each other's
revenues to a degree. Each entity recoups first for the area it has invested
in, and then the profits are split.

The division of labor is the tricky task that comes next. Budgets must
be split in such way that the production qualifies as local content in
each participant's country. The creative control is then negotiated, with
script and storyboard approvals assigned to the participants. In the case
of Ned's Newt, TMO, our German partner, is painting, compositing
and rendering the series with the help of a company in Hungary. In Canada,
NELVANA is handling script, storyboard, design, art direction and post-production.
Layout and posing are split between NELVANA and TMO with digitally scanned
animation being done in the Philippines.

With television animation, delivery dates become a pressing issue. It is
crucial that each partner be aware of the other partners' delivery dates.
The whole team must work together to meet broadcaster requirements.

Constant and open communication is essential since
the specter of cultural differences will inevitably rear its ugly head.
It has been a challenge to adapt Ned's Newt for international audiences.
The humor, essentially North American based, hosts personalities with definite
cultural references, and frenetic slapstick comedy that provides a universal
appeal of sophisticated and subtle adult humor.

A Worthy RiskThere are many reasons to pursue this kind of venture, despite the
inherent risks and increased complexity in negotiations. The recent proliferation
of specialty channels launched in France, Germany, the U.K., Latin America
and Asia, have created a greater demand for children's product in those
markets. A great way to enter those markets is to become a player there.
Co-productions allow instant access.

The biggest advantage to co-productions is the ability it affords you to
reduce the cost of any one show. Although co-productions present their
own challenges, they give your company a competitive edge on a crowded
playing field.

A Recipe for Success
A successful co-production is like a great meal. Even if you follow the
directions carefully, you will never end up with exactly the same taste.
Keeping that in mind, here is a recipe for a successful co-production:

Start with two or more ripe production companies with sufficient capital.
Add while stirring constantly:

a fresh, leafy Canadian script with international
appeal

talented storyboard editors using sharp knives

a gallon of French art direction

a mixture of Czech music

one dozen Swedish layout artists

three dozen Korean DAT tapes of animation

one large Hungarian ink, paint and compositing
facility

Quickly add re-shoots, incorporating comments
from around the world. Bring to a boil then add:

a well-seasoned post production crew assembled
using state of the art editing utensils

Serve immediately through strong distribution
channels.

(Metric conversions available in four languages upon request. Dessert should
be the sweet taste of success; no heavy Europuddings.)